Firms Account for Leases Using Either the Operating Lease Method

question 196

Multiple Choice

Firms account for leases using either the operating lease method or the capital (finance) lease method.Which of the following is true?

• A)The operating lease method treats leases as executory contracts.
• B)The operating lease method recognizes a leased asset on the lessee's statement of cash flows.
• C)The operating lease method recognizes a lease liability on the lessee's balance sheet.
• D)Under the operating lease method, the lessor does not recognize rent revenue as the lessee uses the leased asset over time.
• E)Under the operating lease method, the lessee does not recognize rent expense as the lessee uses the leased asset over time.

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Definitions:

Operations Strategy

A plan that outlines how an organization will allocate resources to support infrastructure and production to meet business objectives.

Competitive Strategy

Strategic approaches that organizations adopt to gain an advantageous position over their competitors in the market.

Automation

The technology by which a process or procedure is performed without human assistance.

Low-Cost Leadership

A competitive strategy where a company becomes the most cost-efficient producer in its industry, often allowing for lower pricing to customers.